Condor Options

The European Volatility Risk Premium Persists

The media narrative at the moment is that U.S. investors are happy to ignore all things European for as long as modestly positive domestic economic news keeps trickling out. The headlines today about stocks being up “on” news from Alcoa were silly enough,* but this does seem to be a real theme – slight reductions in the odds of a 2012 recession mean it’s time to pile into stocks, apparently. The smarter parts of the market qua options and volatility…

PWR Strategy: The ETF Universe

In two previous posts (here and here), I introduced a tactical asset allocation or “rotational” strategy that uses relative strength and momentum criteria to select ETFs on which we can sell bullish vertical put spreads. The attached table shows the list of ETF candidates we select from each month. The list represents every major asset class including U.S. and international stocks, U.S. bonds, oil, gold, agricultural commodities, the dollar, and the euro. Let’s review some omissions. With…

November Interview at Expiring Monthly

My Expiring Monthly colleague, Mark Sebastian, interviewed me for the November issue. We discuss what got me interested in options in the first place, the rationale behind this blog and the newsletters that grew out of it, and some of the mechanics of the VXH strategy. The interview is available as a free download here. The December issue will be published shortly and includes some more thoughts from me on tactical allocation to volatility hedges.

Will the Eurozone Buy Itself Another Call Option?

I have been trying to understand what might motivate Germany to give permission for the European Central Bank unequivocally to don the mantle of “lender of last resort” and allow monetary policy to complement fiscal austerity in the hope of avoiding disaster.* What follows is just a speculative thought that you can dismiss if it seems like nonsense. A metaphor that makes sense to me is one in which Germany is determining whether the purchase of another market-moving call option…